IDEAS home Printed from https://ideas.repec.org/a/wly/emjrnl/v21y2018i3p264-276.html
   My bibliography  Save this article

CCE in panels with general unknown factors

Author

Listed:
  • Joakim Westerlund

Abstract

A popular approach to factor‐augmented panel regressions is the common correlated effects (CCE) estimator of Pesaran (2006). In fact, the approach is so popular that it has given rise to a separate CCE literature. A common assumption in this literature is that the common factors are stationary, which would seem to rule out many empirically relevant cases. Moreover, deterministic factors are typically treated as known, which raises the issue of model misspecification. In the current paper, we show how the conditions placed on the factors in CCE can be made much more general than was previously thought possible. In fact, save for some mild regulatory moment conditions, the factors are essentially unrestricted. One implication of this result is that there is no need to discriminate between deterministic and stochastic factors, but that one can instead treat them all as unknown. This is very convenient for practitioners, because it means that under certain conditions they are spared the problem of having to decide which deterministic terms to include in the model.

Suggested Citation

  • Joakim Westerlund, 2018. "CCE in panels with general unknown factors," Econometrics Journal, Royal Economic Society, vol. 21(3), pages 264-276, October.
    • Handle: RePEc:wly:emjrnl:v:21:y:2018:i:3:p:264-276
    DOI: 10.1111/ectj.12110
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ectj.12110
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ectj.12110?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lastauskas, Povilas & Nguyen, Anh Dinh Minh, 2023. "Global impacts of US monetary policy uncertainty shocks," Journal of International Economics, Elsevier, vol. 145(C).
    2. Jan Ditzen & Yiannis Karavias & Joakim Westerlund, 2022. "Multiple Structural Breaks in Interactive Effects Panel Data and the Impact of Quantitative Easing on Bank Lending," Papers 2211.06707, arXiv.org, revised Jan 2023.
    3. Philip Kerner & Torben Klarl & Tobias Wendler, 2021. "Green Technologies, Environmental Policy and Regional Growth," Bremen Papers on Economics & Innovation 2104, University of Bremen, Faculty of Business Studies and Economics.
    4. Juodis, Artūras & Karabiyik, Hande & Westerlund, Joakim, 2021. "On the robustness of the pooled CCE estimator," Journal of Econometrics, Elsevier, vol. 220(2), pages 325-348.
    5. Vogt, M. & Walsh, C. & Linton, O., 2022. "CCE Estimation of High-Dimensional Panel Data Models with Interactive Fixed Effects," Janeway Institute Working Papers 2218, Faculty of Economics, University of Cambridge.
    6. Stauskas, Ovidijus & De Vos, Ignace, 2024. "Handling Distinct Correlated Effects with CCE," MPRA Paper 120194, University Library of Munich, Germany.
    7. Artūras Juodis, 2022. "A regularization approach to common correlated effects estimation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(4), pages 788-810, June.
    8. Vogt, M. & Walsh, C. & Linton, O., 2022. "CCE Estimation of High-Dimensional Panel Data Models with Interactive Fixed Effects," Cambridge Working Papers in Economics 2242, Faculty of Economics, University of Cambridge.
    9. Kesharwani, Rajkamal & Sun, Zeyi & Dagli, Cihan & Xiong, Haoyi, 2019. "Moving second generation biofuel manufacturing forward: Investigating economic viability and environmental sustainability considering two strategies for supply chain restructuring," Applied Energy, Elsevier, vol. 242(C), pages 1467-1496.
    10. Li, Yu & Kesharwani, Rajkamal & Sun, Zeyi & Qin, Ruwen & Dagli, Cihan & Zhang, Meng & Wang, Donghai, 2020. "Economic viability and environmental impact investigation for the biofuel supply chain using co-fermentation technology," Applied Energy, Elsevier, vol. 259(C).
    11. Isabel Casas & Jiti Gao & Bin Peng & Shangyu Xie, 2021. "Time‐varying income elasticities of healthcare expenditure for the OECD and Eurozone," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(3), pages 328-345, April.
    12. Michael Vogt & Christopher Walsh & Oliver Linton, 2022. "CCE Estimation of High-Dimensional Panel Data Models with Interactive Fixed Effects," Papers 2206.12152, arXiv.org.
    13. Akyol, Sinem & Alatas, Bilal, 2020. "Sentiment classification within online social media using whale optimization algorithm and social impact theory based optimization," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    14. Ovidijus Stauskas, 2023. "Complete Theory for CCE Under Heterogeneous Slopes and General Unknown Factors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(2), pages 283-303, April.
    15. Ho, Manh-Toan & La, Viet-Phuong & Nguyen, Minh-Hoang & Pham, Thanh-Hang & Vuong, Thu-Trang & Vuong, Ha-My & Pham, Hung-Hiep & Hoang, Anh-Duc & Vuong, Quan-Hoang, 2020. "An analytical view on STEM education and outcomes: Examples of the social gap and gender disparity in Vietnam," Children and Youth Services Review, Elsevier, vol. 119(C).
    16. Adefarati, T. & Bansal, R.C., 2019. "Reliability, economic and environmental analysis of a microgrid system in the presence of renewable energy resources," Applied Energy, Elsevier, vol. 236(C), pages 1089-1114.
    17. Stauskas, Ovidijus, 2021. "Uniform Theory for CCE under Heterogeneous Slopes and General Unknown Factors," Working Papers 2021:9, Lund University, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:emjrnl:v:21:y:2018:i:3:p:264-276. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.